Correlation Between IShares Agency and US Treasury
Can any of the company-specific risk be diversified away by investing in both IShares Agency and US Treasury at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Agency and US Treasury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Agency Bond and US Treasury 3, you can compare the effects of market volatilities on IShares Agency and US Treasury and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Agency with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Agency and US Treasury.
Diversification Opportunities for IShares Agency and US Treasury
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and UTRE is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Agency Bond and US Treasury 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 3 and IShares Agency is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Agency Bond are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 3 has no effect on the direction of IShares Agency i.e., IShares Agency and US Treasury go up and down completely randomly.
Pair Corralation between IShares Agency and US Treasury
Considering the 90-day investment horizon IShares Agency is expected to generate 1.2 times less return on investment than US Treasury. In addition to that, IShares Agency is 1.25 times more volatile than US Treasury 3. It trades about 0.05 of its total potential returns per unit of risk. US Treasury 3 is currently generating about 0.08 per unit of volatility. If you would invest 4,904 in US Treasury 3 on August 31, 2024 and sell it today you would earn a total of 12.00 from holding US Treasury 3 or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Agency Bond vs. US Treasury 3
Performance |
| Timeline |
| iShares Agency Bond |
| US Treasury 3 |
IShares Agency and US Treasury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Agency and US Treasury
The main advantage of trading using opposite IShares Agency and US Treasury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Agency position performs unexpectedly, US Treasury can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in US Treasury will offset losses from the drop in US Treasury's long position.| IShares Agency vs. iShares Intermediate GovernmentCredit | IShares Agency vs. iShares GovernmentCredit Bond | IShares Agency vs. iShares New York | IShares Agency vs. iShares California Muni |
| US Treasury vs. US Treasury 5 | US Treasury vs. US Treasury 30 | US Treasury vs. US Treasury 7 | US Treasury vs. US Treasury 20 |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities |